Businesses across the UK are reporting a sharp rise in “friendly fraud,” a type of chargeback scam in which customers falsely claim they did not make purchases that they knowingly completed. The growing trend is placing financial strain on small firms and prompting calls for stronger protections.
The scheme works by allowing a customer to report an unrecognised transaction to their credit card company. The bank issues a refund, while the business is charged the same amount and an additional fee. UK Finance, which represents the banking industry, acknowledges the issue, noting that while chargebacks offer vital consumer protection, some individuals are abusing the system.
Among those affected is Rusty Nart, who owns Green Monkey London in Tooting and Fingers Kebab in New Addington. He told the BBC that both businesses have seen an increase in fraudulent disputes, particularly after taking payments over the phone. Customers deny making purchases weeks later, leaving the business to cover the loss.
“Not only do you have to pay back the money they spent, but you’re hit with a £28 fee plus VAT,” he said. “You’ve provided the food or service, so you lose out entirely.”
Frustrated by repeated setbacks, Nart began keeping every physical receipt for three months to track down disputed orders. He even visited the homes of customers who filed false claims, successfully recovering money each time. He warned other business owners against doing the same due to safety concerns, but said he felt left without support as banks and payment providers appeared slow to act.
Worldpay estimates that all types of credit card fraud, including friendly fraud, cost UK businesses £551.3 million in 2023. The problem is not limited to Britain. A global report from LexisNexis Risk Solutions found that first-party fraud rose from 15% in 2023 to 36% in 2024, making it the most commonly reported fraud category. Analysts expect the trend to worsen in 2026 due to economic pressures prompting more consumers to act dishonestly.
The rise in false claims has led to a growing industry of companies selling tools to help businesses dispute chargebacks. Chargeflow CEO Ariel Chen described how his previous company was overwhelmed by non-criminal but costly claims in which customers clicked “I didn’t receive it,” prompting him to develop a defence system that is now widely used by merchants.
Legal consequences for friendly fraud can be severe. Solicitors note that intentionally filing false claims may be prosecuted under the Fraud Act 2006, with penalties of up to 10 years in prison. Payment technology firm SOTPay stresses that such cases are not harmless: “It is essentially stealing,” the company says.
UK Finance warns that small businesses are being hit hardest, but maintains that chargebacks remain essential for genuine disputes. The organisation advises firms to keep detailed records, use delivery services with proof of receipt, and implement fraud-prevention tools to limit exposure.
